Three long years of extend and pretend have left the nation in a state of suspended animation, frozen in a moment of crisis.

The U.S. is in a peculiar state of suspended animation: nothing is actually moving, we're all frozen in an extended moment of disbelief, denial and crisis, waiting for something to finally break loose.

We know the present isn't sustainable, but we go through the motions of phony "reforms" and "trimming the deficit" as if another 1,000 pages of "reforms" will fix what's broken in the economy or that trimming $50 billion from $1.7 trillion annual deficits will actually matter.

The wheels visibly fell off the bubble-debt-fraud economy four years ago in mid-2007. It's worth recalling that the U.S. won a global war (World War II) in less than four years, yet now we are pleased to borrow and and squander an extra $1 trillion a year just to keep our fragile state of suspended animation from being disrupted by unpleaseant reality.

In a nutshell, here's the reality: the entire "prosperity" of the past decade was a false prosperity, constructed entirely of money borrowed by the private sector based on the rising value of McMansions and strip-malls that made no sense except as speculations based on the Federal Reserve's credit-bubble policies and Wall Street's systemic financialization of that debt based on fraud and misrepresentation of risk.

The private sector borrowed and spent an extra $1 trillion a year in the "boom years" of the bubble decade. This debt-based stimulus vanished with the implosion of Wall Street's fraud machine (CDOs, mortgage-backed securities, etc.) and the collapse of bubble-era housing valuations.

As overleveraged households and businesses found they could no longer borrow $1 trillion extra a year to spend, then the Federal government stepped in and borrowed and spent $1 trillion a year to replace the private borrowing which had dried up.

This $1 trillion is incredibly obvious. Federal spending rose by exactly $1 trillion from 2007 to 2010, while revenues fell by $400 billion:

Spending:2007 $2.72 trillion2010 $3.72 trillion

Revenues:2007 $2.56 trillion2010 $2.16 trillion

Deficit:2007 –$160 billion2010 –$1.56 trillion

This is how you get an annual structural deficit of $1.5 trillion. This sum will never go down, it will only go up, as the estimated deficits for 2011 and 2012 show:

2011: $1.5 trillion (est.)

2012: $1.6 trillion (est.)

This doesn't even count off-budget borrowing for bailing out our Moral Hazard Twins Fannie Mae and Freddie Mac and for additional war expenses.

Add off-budget borrowing and the structural deficit is 12.5% of GDP. This is only one comparable period of Federal borrowing and deficit spending: World War II, which ended in less than 4 years (December 1941 to August 1945).

Here we are, borrowing 12% of GDP every year for four years, with no end in sight. All we're doing is propping up the Status Quo.

The private economy cannot support an additional $1 trillion in borrowing and spending every year. Housing assets and household earnings continue to decline even as basic household expenses for energy, food education and healthcare continue to rise.

Households cannot borrow an extra $1 trillion a year, and that will not change in the foreseeable future. This is not the warm and fuzzy stagflation of the 1970s, when wages and interest income rose along with prices: in this Fed-engineered stagflation, wages remain flat-to-down and savers earn nothing for their capital, while taxes and costs for essentials steadily rise. The primary asset for 2/3 of the nation's households, housing, continues to fall. The rising stock market increases the wealth of the top 10% of households, but does little to nothing for the bottom 90%.

The Fed's policy of a top-down "wealth effect" is widening an already unprecedented gap between the "haves" and the "have-nots" in the nation. This widening divide is no secret; it is simply another feature of our suspended animation.

Simply put: the present set of policies is a recipe for household and national insolvency.

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Somewhat OT and not to disagree with Mr. Smith but there is a real economy outside the world of bankster make beleive and crime. A true titan of the real business world, French Fry King Wallace McCain passed away on the weekend. He and many like him represent the real economy. His story is worth reading:

It is an amazing story, this guy and his brother created a multi billion dollar global company (still private) from a little village just across the Maine border. When he and his brother had a falling out he moved to Toronto Canada and built another mult-billion dollar company. If you read some of the comments you get a unique insight into the style of a true entrepreneur. This is the antithesis of the fake bankster economy.

Might be suspended animation this week, but people are feeling the pinch. I am. Increasing gas prices from 2.58 to 4.00, a 35% increase - a 2 car family spending $328 per month is now spending $508, a decrease to disposable income of $180. Increasing food prices...have you seen the price per pound of ground chuck lately? Many items are very expensive...a package of Lorna Doones, the small package is now 4.59. The cereal boxes are substantially smaller for higher prices, same with laundry detergent.

Clothing prices are higher. Money is getting less available for the poor and the middle class.

Suspended animation? Look, possession has always been nine tenths of the law. Once all the fiat burns, it will be 100% of the law. Got physical? "Mark to unicorn" accounting is fantasy and will die when people demand their unicorns back. None of this ends well, so hedge accordingly and by that I really mean prepare accordingly. Every choice you make is technically a "hedge" in one form or another.

I've had a feeling of suspeded animation too for a couple of years. It is like I'm watching a movie of a tidal wave of disasters heading for shore in slow motion. For the last 6 months though it seems like the movie is speeding up. When it reaches full speed the wave will be upon us.

The great majority do not know of what you speak, nor understand the powerful words you have written.

We are in the eye of the hurricane. Everything is calm until it is not. The tipping point has not been hit. The masses especially those who have not been affected by unemployment in the last 4 years do not understand any of this.

Like an attempt to jump the Grand Canyon, we have left solid ground and are presently temporarily suspended in mid air, looking at a clear blue sky. What awaits us below is not visible nor measurable in speed of descent nor final outcome.

As far as the "great majority" is concerned, I work in a company of 34 people in New England. With our accountant today I used the word "austerity" to describe the belt tightening we've been doing here and she stopped me to say she didn't know the term.

I find the ignorance of our fellow Americans guarantees our political & economic doom. Nothing else. Our true bogie man is not the banker, or imam, ChiCom, Frenchman, liberal or conservative; it is the boobus Americanus, the great majority you speak of.

I know what you mean. I was in a continuing education class with a bunch of CPAs back when AIG was bailed out, and when I started talking about how outrageous is was that Geithner was in the room during the "negotiations" they had no idea what I was talking about, nor did they care.

"In a way, the world-view of the Party imposed itself most successfully on people incapable of understanding it. They could be made to accept the most flagrant violations of reality, because they never fully grasped the enormity of what was demanded of them, and were not sufficiently interested in public events to notice what was happening. By lack of understanding they remained sane. They simply swallowed everything, and what they swallowed did them no harm, because it left no residue behind, just as a grain of corn will pass undigested through the body of a bird."

Daily I am reminded how little our population understands about what's going on. It amazes me how little the same population understands even simple math. It's hard to be optomistic going forward. That quote says it all.

I figure the cosmological constant for the human race is 51% good, 49% evil. If evil tipped up 200 basis points we'd have been done around the time of the Cuban Missile Crisis. Hank "The Traitor" Paulson and Timmah Geethner are on the worng side of that constant by the way.

Suspended animation my ass. We are zombies. Every last dollar holding one of us. To "save" the too big too fails, they sucked the life out of the rest of the country, leaving nothing but estinkin undead zombies. The only things with life left in them are GOLD, and SILVER BITCHEZ!

Suspended animation my ass. We are zombies. Every last dollar holding one of us. To "save" the too big too fails, they sucked the life out of the rest of the country, leaving nothing but estinkin undead zombies. The only things with life left in them are GOLD, and SILVER BITCHEZ!

"... the U.S. won a global war (World War II) in less than four years."

That's the official line according to our government-provided education system. But the brunt of the war was fought and won by the Russians. We got there at the very end and helped brush aside what was left of the German troops. We did defeat Japan largely alone, but they were vastly over rated in terms of assets and weapons quality.

The Germans would probably have whipped the Russians if they only had to deal with them. The Germans had to do a ton of prep prior to 1944 to prepare for the inevitable attack from the west, not to mention the resources they had to devote to North Africa. And I think you understate the quality of the Japanese military in WW2, a lot of military historians believe they turned out to be a lot tougher than anyone anticipated. And don't forget that the Brits wiped out the Luftwaffe. So the Russians had a lot of help.

hehe. You're stating an old 'party' line. The stark reality at Stalingrad hit the Germans square in the face at the peak of their power: they were unprepared, overextended and ill-equiped. Worst of all, they were running out of oil. That's why they were there in the first place. Stalingrad is the gateway to the Black Sea oil fields. Hitler diverted forces to the region because the situation was becoming critical: they were running out of horses which they were using to haul military supplies (!) And the synthetic oil production experiment could not be scaled up enough to meet demands. US engagement of the Germans only began 1 month before the battle of Stalingrad.

Well, the past decade was not an illusion... it was a calculated transfer of wealth from the middle class to the top:

90% of the population was told to measure their wealth by how much debt they owed, the other 10% measured their wealth in the $millions and $billions they were able to extract from 'consumers' (a.k.a. cattle, sheeple, ...).

Unfortunately, contrary to everything Americans held sacred in economics, there was no trickle down ... just more debt and even more bulshit!

Summer +- of '07 will alway's stick in my mind at how unreal thing's had become. I tried to envision this 'Fed overnight fund's window' thing I had heard about on the radio,trying to square it with what my own eye's were seeing. I could'nt understand how people were getting these huge mort's and heloc's for crappily built monster house's in crappy location's. I was making the most money than I had ever made in my life,yet I would'nt touch one of these deal's with a ten foot pole.I remember eating my meager lunch sitting at the Pulitzer fountain watching the endless steam's of people pouring into the new Apple cube store and so heavily laden with shopping bag's that they could not keep themselve's properly hydrated as evidenced by the profligate consumtion of 3 dollar bottle's of water. Deep down I marveled at how fast and loose thing's had become,on the surface it seemed to be working O.K.,but my mind kept nagging me. I might have jumped off the train (literally and figuratively) a bit early,but in hindsight it has been a fortuitous time for reflection and re-adjustment. I did'nt know it then,but my deer in the headlight's moment was nearly 4 year's ago,somehow I reacted and jumped out of the way of the carfull of joyrider's merrily on their way to the inevitable crash. Saywhat you want,ride the bull,whatever-big change's are coming . You cannot suspend people's need's and when those need's are unmet due to the big broken promises and endless big lie's and theft you will see animation. The world has taken a deep breath and is (just for now) holding it in

The whole experience of watching the economy of the last decade felt like everything "Was On Steroids". Of course that was the running tagline/joke that everyone was repeating all the time. But sadly it turned out to be true!

We had athletes on steroids (Barry Bonds, Roger Clemens, Mark McGwire) and they were suddenly all sprouting arms the size of tree trunks and setting all time records out of nowhere. In other words, they were cheating and their "records" mean nothing and should be retracted.

We had houses on steroids (McMansions) and cars on steroids (giant gas guzzling SUVs when we should have been conserving oil) and food on steroids (SUperSIzeME!). The latter famously became the subject of the namesake documentary film by Morgan Spurlock which dared to discuss the dark side of "too much". We even had a war on steroids that became two wars and a surge and for a moment it looked like maybe we should just keep going.

There was an insanity to the pace and level of economic expectations. It pervaded everything. But make no mistake, it was hiding a very deep and very serious anxiety. It was taboo to discuss but there was a pervasive fear. And yes, reasonable people living within their means were ridiculed by those drinking the steroid kool aid

Yes, I remember the times all too well, but for me, the epiphany came in 2003. Nothing made sense. What I was witnessing had nothing to do with reality. Because of the ephemeral nature of the feelings, and my inability to get my thoughts across, I was unable to get my wife of 30 years to understand what I saw coming. I tried to get her to see that you don't own your "stuff", your "stuff" owns you. We were both working at jobs we hated, just to pay the upkeep on our "stuff".

We owned two houses outright, no mortgages and a summer house on the lake, also paid for. I spent my life working to pay for these places, and all my spare time doing maintenance and upkeep.

I tried to get my wife to think about retirement, we had accummulating this "stuff" and were trapped by the maintainance and upkeep, never really being able to enjoy it. (except in the fact that we could show our acquaintences how "well off" we were). But the wife could not give it up. I guess it had become a part of how she defined herself.

To make a long story short, I gave her all the "stuff" and left. Last I heard she is still working to keep it up. Me, I have been "retired" for the last 8 years. I have a small pension that barely suffices to meet my needs, but I have never been happier.

And now I watch as the financial world implodes and thank my luck stars that I am not connected. Now as real-estate approaches it's comupance, I laugh to think, that had my ex heeded my warning, we would have been a lot better of then than she is now.

Oh, and I loved that Jackson Brown, Running on Empty reference. Very precient indeed.

Everyone I know, everywhere I go People need some reason to believe I don't know about anyone but me If it takes all night, that'll be all right If I can get you to smile before I leave Looking out at the road rushing under my wheels I don't know how to tell you all just how crazy this life feels I look around for the friends that I used to turn to to pull me through Looking into their eyes I see them running too

Those that lent the debt and are holders of the debt must take haircuts..the problems become very managebale afterwards..but they have bought the congress and government to avoid that..which brings us to where we are today

After forcing the parent into huge debt, courtesy of the illusion of ever-growing home equity, now they're pulling the same trick on the children through college loans ... after parents and children will be in debt, they will go after the future generations ...

What percent of the youth population ages 22 to 40 have jobs of sufficient income to marry and raise a family?

Excluding the top 1% and the young boomers who will inherit from the Koren/Viet Nam generation - What wealth will be left to the rest of the middle class population after the housing ATM has been destroyed?

At the individual level - unpayable debt is slavery. This is our legacy of the last 20 years.

"Simply put: the present set of policies is a recipe for household and national insolvency."

Yes, enter the global currency. The new "world" currency will be forced upon the masses or they will fight to the death for the entertainment of the world banking cartel. OR we independently decide to trade and deal in a currency of our own choosing. Got physical?

The author seems to still be puzzed as to the motives of our government and banking system. The idiotic actions are either criminal incompetence, or they are quite intentional. I believe that it is the latter.

America must be destroyed both economically, as well as intellectually (the idea that man can rule himself). You are witnessing it right now. Don't let your normalcy bias keep this possiblity off the table. Well-moneyed and powerful people would like to put all of us under one central, socialist government so they can play elevate their narcissistic selves to the rank of humanist god. It is a liberal wet-dream that that Soros and company are trying to make a reality. Learn about Soros, learn your (real) history, or it WILL mean the end of freedom for mankind for a long time...

Socialism .... I wouldn't know .... all I know is that we are enjoying the fruits of reverse-socialism ... suck the middle class dry ... move the wealth to the top ... expatriate the wealth possibly evading taxes ...

"In a nutshell, here's the reality: the entire "prosperity" of the past decade was a false prosperity, constructed entirely of money borrowed by the private sector based on the rising value of McMansions and strip-malls that made no sense except as speculations based on the Federal Reserve's credit-bubble policies and Wall Street's systemic financialization of that debt based on fraud and misrepresentation of risk."

Well any alien over the age of two eons would have known this long ago. Must have been the plan he would have figured ,or that the nutbars were running the asylum.

Suspended Animation is a fitting description given that the FED is trying to do everything in its power to keep to velocity of the money it has created at zero. An object that large overcoming inertia in the form of a monetary avalanche will not be a pretty sight as interest rates flee to higher ground.

The only guy really feeling suspended animation today is that ex- oligarch DSK in his prison cell. He is now very much in his own self-written scenario of the TV serial 'Damages'...whatever the final issue...it's a twister.

Funny how reality has its way of biting back and making fiction look like a pale copy... I'll take reality any day over fiction when the script is so well written!

Go, go, history! and put suspended animation into active motion, make limbo into slapstick, a three stooges comedy... or the macabre sequel to Dr Jekyll and Mr Hyde of the world banking sector collapse. Shades of Fukushima calling...those wicked sons of Jekyll Island...